A guide to store cards and interest rates | SavvyWoman

A guide to store cards and interest rates

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Store cards can be an expensive way of shopping, unless you pay them off in full every month. Find out more in my guide to store cards and interest rates.

How store cards work

Store cards are very similar to credit cards, in that you can use them to buy things and pay for them later. However, there are some key differences:

  • You can only use a store card in the shop or group of shops owned by the same group.
  • The interest rates tend to be higher than with ordinary credit cards.
  • The credit limit tends to be lower than with ordinary credit cards.
  • There are often higher minimum payment amounts than with ordinary credit cards.

SAVVY TIP: As with credit cards, you should get consumer protection under section 75 of the Consumer Credit Act if you use your store card. There are some situations when this may not apply.

How interest can add up

Store cards used to charge interest rates of almost 30% APR and while many of them charge less (typically around 20% APR), store cards can still be costly.

It’s all very well to talk about APR and interest rates, but most of us think in £s, not percentages. A couple of examples might help to make it clearer and spell out exactly how much interest you could pay:

  • If you spend £200 on a store card with an APR of 19.9% and make the minimum payments every month of 4% of the balance (which is the minimum amount that a number of cards ask for), after 12 months you’d have paid £30 in interest and you’d still owe over £149.
  • If you spend £200 on a store card with an APR of 29.9% and make the minimum repayments of 4%, after 12 months you’d have paid over £52 in interest and you’d still owe over £164.

A guide to store card tricks

Store cards aren’t a no-no for everyone and they can work for you if you’re planning to spend a lot of money with the same retail chain, because you often get a discount. Some cards do this as a one-off when you sign up, but increasingly card providers do this throughout the year. But you should also make sure that you:

  • Pay off the bill in full every month, otherwise you could be be charged interest at 20% APR or more.
  • Don’t spend more than you should or spend money you don’t have, simply because you have a store card in your purse.

How store cards are sold

You may be offered a store card at the till but these days it’s more likely you’ll be asked to sign up online. Retailers can offer a discount off your shopping or the chance to access sales early or invitations to special events or sales (on and/or offline).

SAVVY TIP: Retailers can’t offer a discount for seven days after you’ve taken out the store card. The idea is that you’re not tempted by an immediate discount. They also can’t pay staff a commission when they sign someone up for a store card.

Store card interest rates

The interest rates on store cards don’t tend to alter in line with Bank of England base interest rate changes, but they do change from time to time. Here are some of the more popular cards (the representative APR is the interest rate that at least 51% of successful applicants are paying):

Debenhams Credit Card: This isn’t a store card but a branded credit card. Representative interest rate of 24.9% APR. The rate you actually pay may depend on your credit score.

Dorothy Perkins MasterCard This isn’t a store card but a branded credit card. However, it has a high interest rate (more like a store card). Representative interest rate of 29.9% APR. Minimum payment levels of 1% of the amount you’ve borrowed on top of any interest and fees or £5.

SAVVY TIP: Dorothy Perkins has discontinued its store card.

House of Fraser Recognition Account Card: You can no longer open a Recognition Account Card. However, they are still accepted in all UK House of Fraser stores and online. Representative interest rate of 24.9% APR. Minimum payment levels of 1% of the amount you’ve borrowed on top of any interest and fees or £5.

My Oasis Card: Representative interest rate of 28.9% APR. Minimum payment levels of 3.65% or £3.65.

Topshop Card: Representative interest rate of 19.9% APR. Minimum payment levels of 1% of the amount you’ve borrowed on top of any interest and fees or £5.

Wallis Mastercard: This isn’t a store card but a branded credit card. Representative interest rate of 29.9% APR. Minimum payment levels of 1% of the amount you’ve borrowed on top of any interest and fees or £5.

Related articles: 

Understanding your credit card rights under section 75

Faulty goods – there are new consumer rights from October 1st 2015

Your rights when shopping for clothes in the sales; what can you do if there’s a problem?

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